REGION: Riverside County could lose millions in wake of property-tax fee ruling

Riverside County may lose $7.2 million now and $2 million annually starting in 2013, as a result of a court ruling invalidating fees counties charge agencies for handling their property-tax revenue, local officials say.

The county expects to have to shave its fees as a result of a Nov. 19 California Supreme Court decision in a case the city of Alhambra brought against Los Angeles County, potentially creating winners and losers throughout the state.

The winners would be cities and special districts, who stand to receive reimbursements for charges going back a few years and to pay reduced fees going forward. And California counties would be the losers. Not affected are school districts, which don't pay such fees.

Riverside County officials are bracing for the potentially greater than $7 million hit.

The loss also comes at a time when a multimillion-dollar gap has opened in Riverside County's budget

"This is bad news because we’re trying to close that ... gap and all of the sudden we get this dropped in our laps,” said Auditor-Controller Paul Angulo.

At the same time, the decision is welcome news to area cities, most of which also are struggling financially.

"Any time a decision a goes in favor of cities it is helpful to cities right now," said Joy Canfield, Murrieta's finance director. "Everybody is in the same boat."

Canfield said Murrieta isn't sure how much it would be reimbursed, but estimates it could save about $90,000 a year from a fee reduction. She said that is how much more the city began paying in property-tax administrative fees when the charges went into effect a half dozen years ago.

James Riley, Lake Elsinore's director of administrative services, said his city is analyzing the potential impact.

The fees have been around more than two decades.

In the wake of tax-slashing Proposition 13, the Legislature decided in 1990 to let counties bill cities for the cost of allocating their property taxes.

Then a year later, the Legislature exempted schools and community colleges from paying those property-tax administrative fees.

Then came 2004 and lawmakers' complex reshuffling of sales, property and vehicle tax revenue among government entities. In response to that so-called "triple flip," the California State Association of County Auditors put out guidelines for increasing fees effective in fiscal year 2006-07, according to the court ruling.

Los Angeles County followed those guidelines, and withheld millions in additional fees from cities. Yet, the extra cost of handling their property-tax revenue under the revised revenue scenario added up to $35,000, according to the ruling.

And the state's highest court voided Los Angeles County's fee.

Riverside County Finance Director Ed Corser said Riverside relies on the same guidelines.

“There is a fee that we charge to cover the cost of collecting and distributing property taxes for cities. That involves the assessor, treasurer and the auditor," Corser said. "That fee has a formula with it that was basically considered statewide by counties to be appropriate. That’s why we are in the same boat likely as L.A. County.”

The potential loss looms as Riverside County is having trouble staying within a $622 million adopted general fund budget for the fiscal year that runs through June.

Pam Elias, chief accountant in the auditor-controller's property tax division, said the county may be "on the hook" for $7.2 million.

Elias said the estimate is based on reimbursing most cities for three years of perceived overcharges and six years for Riverside and Moreno Valley. Riverside filed a claim and Moreno Valley sued over the matter, she said.

Elias said the county hasn't determined how much Southwest County cities might receive.

She added that counties are considering litigation to answer the question of whether the decision should apply retroactively, and if so how far back and at what interest.

Officials said the assessor could lose $5.7 million of the $7.2 million reimbursement total, and $1.5 million of the $2 million reduction anticipated every year going forward.

The office has an annual budget of $23 million and 185 employees.

"We’ve taken hits over the last several years, as have other county departments," Ward said.

But he said this potential loss is especially concerning, given that his department plays a key role in generating revenue for Riverside County. Property taxes fund about 85 percent of the local budget.

“The real estate market is starting to pick up. Homes are starting to be built. Values are starting to come up," Ward said. "My concern is that we would miss out on some money for the county, if we can’t get our job done.”